Health reform is the “new normal” in health care delivery, ushered in by Medicare implementation of the Affordable Care Act. The underlying concept is that payment must be tied to quality or value, not volume. This is reflected in new Medicare payment models and initiatives which fall within these general categories.

Accountable Care Organizations (ACOs)

ACOs are groups of doctors, hospitals, and other providers that join together to provide coordinated care. ACOs share financial savings or losses with Medicare based on how well they meet quality and cost benchmarks.

Background

Patients often receive care from different providers in many different settings, with little or no coordination. ACOs attempt to encourage coordination and better care by letting providers work together more closely across delivery settings, such as hospitals, clinics, and nursing homes.

CMS Initiative

CMS uses several different models for ACO shared savings and losses.

Shared Savings ACOs

Providers share in financial savings if they meet quality and cost benchmarks. They can receive a higher percentage of shared savings if they agree to share in losses.

Pioneer ACOs

Providers share in a generally greater percentage of financial savings than Shared Savings ACOs and are also required to share in financial losses. They can choose to share in up to 70% of shared savings or losses.

Next Generation ACOs

Providers can take on even greater financial risk than Pioneer ACOs—they can share in up to 80% and 100% of shared savings/losses. CMS also waived the rule which requires a three-day inpatient stay before a patient can be admitted to a nursing home. It also waived limits on telehealth and post-discharge home visits.

Implementation

January, 2012

Impact

ACOs move Medicare payment from a per-service basis to one that is based on the ability to improve the health of patients while reducing costs.

Bundled Payments

Under the Affordable Care Act, CMS is carrying out several projects that use various models of bundled payment.

Background

Bundled payments cover all the services a patient receives from all providers for a medical condition during a specific interval of time. This interval—known as an “episode of care”—can vary widely. It might be a full inpatient hospital stay, or it might also include, or “bundle,” the post-discharge care or home care. The purpose is to encourage providers to work together more closely across specialties and settings.

CMS Initiative

CMS is now operating several different bundled payment initiatives.

Bundled Payment Care Initiative: Begun in 2012, this demonstration project allows providers to choose from four different bundling models. Most providers selected payment bundles that included either the acute care hospital stay, plus post-acute care for up to 90 days, or just the post-acute care itself. The most common conditions covered: hip and knee replacement, congestive heart failure, coronary artery bypass graft. Some 2,000 providers are participating.

Comprehensive Care Joint Initiative: This program pays hospitals a bundled payment for knee and hip replacements that covers the procedure, inpatient stay, and all related costs (including any readmissions) occurring within 90 days of discharge.Hospitals in 34 geographic areas are required to participate.

Oncology Care: Begun in 2016, this demonstration project pays physicians a bundled fee that covers all oncology services a patient receives, including hospital, physician, drug, and lab services, during a six-month period.

Bundled Payment Care Initiative – Advanced (BPCI Advanced): In October, 2018, Medicare will introduce a voluntary program that will pay bundled prices for 29 inpatient and 3 outpatient procedures and any follow-up care for 90 days following discharge. The payment will include care provided by hospitals, physicians, and post-acute providers, such as nursing homes and hospice services. The program will continue through December, 2023.

If providers exceed the bundled price, they will be required to pay CMS back. The program will be considered an Advanced Alternative Payment Model (AAPM) under the MACRA Quality Payment Program, which means that clinicians participating in BPCI Advanced may be eligible to receive a 5% annual incentive payment between 2019 – 2014. View CMS fact sheet on BPCI Advanced, including full list of procedures.

In all of these, Medicare pays providers on a fee-for-service basis up front. Then, after the care has been delivered, it reconciles the provider’s actual payments to equal the bundled payment price.

Pay-for-Value

New incentives in Medicare’s payment systems link payment directly to the quality, rather than quantity, of services.

Background

Fee-for-service payment systems contain incentives that encourage physicians and hospitals to provide more services than may be necessary.

CMS Initiative

Using such terms as “pay-for-performance” or “value-based payment,” CMS has introduced a wide range of initiatives in its payment systems for hospitals, physicians, home health agencies, and other providers that tie payment levels to the value and quality of care provided.

Hospital-Acquired Conditions: Medicare no longer pays hospitals for the additional costs of treating 14 conditions/injuries that patients acquire while they are in the hospital. In addition, Medicare cuts payments by 1% if hospitals are among the 25% worst-performing hospitals nationwide in reducing hospital-acquired conditions.

Value-Based Purchasing: Medicare bases a portion of its payment to hospitals, physicians, and home health agencies on how well they meet a variety quality and cost standards. Excellent performance means a bonus; poor performance means a penalty.To fund the program, Medicare holds back 2% of all DRG payments annually. This percentage reduction applies to all DRG payments--not just those related to the conditions covered by the quality and cost measures. Medicare then uses the money for the incentive payments, which total $1.9 billion in Fiscal Year 2018.

Readmissions: Medicare reduces payment for hospitals with high rates of readmissions for patients with certain conditions. These include heart failure, pneumonia, heart attack, chronic obstructive pulmonary disease, elective hip and knee replacement, and coronary artery bypass graft (starting in Fiscal Year 2017). The maximum penalty = 3% of hospital’s base DRG claims. These reductions apply to ALL Medicare cases, not just those readmitted.

New Physician Payment System: CMS is implementing a new value-based program for updating its payment rates for physicians. Called the Quality Payment Program, it determines annual payment changes based on how well physicians perform on outcomes, quality, and cost measures. Physicians must choose one of two payment tracks:

1. Merit-Based Incentive Payment System (MIPS): This track adjusts payments based on how well physicians perform in four areas: quality, cost, clinical practice improvement, and use of electronic health records. Payments can be adjusted by as much as plus-or-minus 4% in 2019, increasing to plus-or-minus 9% in 2022.

Most of these programs went into effect as a result of the Affordable Care Act of 2010. The proposed changes in physician payment would begin to go into effect in 2017, but payment adjustments would not begin until 2019.

Primary Care/Medical Home

CMS is carrying out initiatives to encourage more comprehensive primary care based largely on the principles of the patient-centered medical home.

Background

Primary care practices are a key point of contact for patients, but care is often fragmented. Greater access to primary care providers is intended to reduce costs, decrease preventable hospitalizations, and achieve quality improvement.

CMS Initiatives

Several efforts are underway to encourage more comprehensive primary care delivery, including improved care for complex patients.

Comprehensive Primary Care Initiative: Working with commercial and state health insurance plans, CMS provides bonus payments to primary care doctors who take on additional responsibility for coordinating care for patients, including coordinating and managing care transitions and referrals. The additional resources also help doctors add more comprehensive primary care functions, such as planning preventive and chronic care. CMS also offers practices the chance to share in savings. CMS reports that 445 primary care practice sites are participating.

Comprehensive Primary Care Plus (CPC+): In January, 2017, CMS launched a new medical home pyment model that provides physicians with up-front payments and other financial incentives to encourage more comprehensive and coordinated primary care—especially for patients with complex diseases.

Called Comprehensive Primary Care Plus, or CPC+, the program is a voluntary, five-year demonstration project that brings together Medicare, commercial health plans, and state Medicaid agencies. The project broadens use of the “medical home” payment model in which physician practices take on an active role in coordinating all medical services a patient needs, regardless of provider or setting.

The program will be implemented in up to 20 regions and encompass more than 20,000 doctors and 25 million Medicare beneficiaries.

Advanced Primary Care Practice Demonstration: CMS recently concluded a three-year demonstration project of patient-centered medical homes conducted among federally qualified health centers. The program tested the effectiveness of doctors and other health care professionals working in teams as part of a patient’s medical home, to coordinate and improve care as well as reduce costs. Some 434 community health centers in 44 states participated. CMS is now evaluating the results.

Independence at Home: CMS is conducting an “Independence at Home” demonstration project that provides a complete range of primary care services to chronically ill Medicare beneficiaries in their own homes. Medical practices led by physicians or nurse practitioners provide home visits tailored to the patient’s needs and are responsible for coordinating care with other health professionals. They receive an incentive payment if they succeed in providing high-quality care while reducing Medicare costs. A total of 14 individual medical practices and groups of practices are participating in the project, which will end in September 2017.

Implementation:

2011

Impact:

Primary care is becoming the entry point for greater care coordination and patient management across providers and delivery settings.

Resources

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